Is it bad to have a credit card you never use?

The Silent Threat in Your Wallet: Why Unused Credit Cards Can Hurt You

It seems counterintuitive: a credit card, tucked away, untouched, potentially causing harm. But the truth is, unused credit cards can be detrimental to your financial well-being, acting like a silent threat in your wallet. While it might be tempting to simply forget about them, understanding the risks associated with inactivity can save you from potential headaches down the line.

The Risk of Closure and the Fraud Factor:

One significant issue with unused cards is the risk of closure. Credit card issuers are in the business of making money, and inactive accounts don’t generate revenue. Consequently, they may close your account, especially if it remains dormant for an extended period. This might seem harmless, but it can negatively impact your credit utilization ratio—the amount of available credit you use compared to your total credit limit. A higher credit utilization ratio can lower your credit score, making it harder to secure loans or favorable interest rates in the future.

But there’s another, more sinister reason to be wary of unused cards: fraud. While it might seem that an untouched card is safe from nefarious activity, the opposite can be true. Since you’re not actively monitoring the account, fraudulent activity can go unnoticed, potentially damaging your credit score and financial standing before you even realize there’s a problem.

Credit Score Sabotage:

Beyond utilization, inactive credit cards can negatively impact your credit score in other ways. A long credit history, showing responsible use over time, contributes positively to your score. When an account is closed, particularly an older one, it shortens your credit history, potentially lowering your score.

Furthermore, neglecting to check your credit card statements, even for inactive accounts, means you might miss crucial information. Errors, unauthorized charges, or even changes to the card’s terms and conditions can slip by unnoticed, potentially affecting your creditworthiness without your knowledge.

Taking Control: Safeguarding Your Financial Health:

The good news is, managing unused credit cards doesn’t have to be complicated. Here are a few simple steps to mitigate the risks:

• Regular Monitoring: Make a habit of reviewing statements for all your credit cards, including inactive ones. This helps you stay vigilant against potential fraud and ensures you’re aware of any changes to your accounts.
• Strategic Use: Instead of letting your card gather dust, consider using it for small, recurring purchases like subscriptions or gas, and then paying off the balance immediately. This demonstrates responsible credit use and keeps your account active.
• Closure Consideration: If you genuinely have no need for a particular card and don’t foresee using it in the future, consider closing the account strategically. Prioritize closing newer accounts first, as older accounts contribute more positively to your credit history.

Ultimately, unused credit cards, while seemingly harmless, can pose significant risks to your financial well-being. By adopting a proactive approach—monitoring statements, making strategic use of cards, and making informed decisions about closure—you can safeguard your credit score and maintain a healthy financial profile.